Forecast

Connecticut's student loan debt drags down net worth

on May 28, 2014

The thousands of Connecticut college students who crossed the stage this month to claim their diplomas have met the huge challenge of attaining a degree. But some of the biggest obstacles still lay ahead -- like the tens of thousands of dollars many owe in student loans.

The average amount of outstanding debt for Connecticut residents is among the highest in the nation, at $25,100 per borrower, according to a Federal Reserve Bank of New York analysis of fourth-quarter figures from 2012. That puts the state at 14th highest among the 50 states and Washington, D.C.; debt load is the lowest in Wyoming, where the balance averages out to $20,700 per borrower, and is the highest in D.C., where the figure is $41,200. Nationally, the average is $21,400.

The high level of debt among graduates now eclipses the nation's credit card debt load, as the Pew Research Center reports that a record high share of 37 percent of U.S. households headed by an adult under the age of 40 had some student debt in 2010. That rate is up from 29 percent only three years earlier, and the increase has significantly changed the nation's economic outlook.

College-educated adults with no student loans have a net worth about seven times greater than those with student debt, according to Pew, which lists the worth figures at $64,700 and $8,700, respectively. That lower net worth exists even though income between college graduates with student debt earn an equal income to those without it: $57,941.

The lower net worth of adults carrying student loans on their back is due in large part to the payments they send out every month to cover the cost of earning their cap and gown. But that's not the only debt pressing against these borrowers. Their overall debt is also 87 percent higher than the debt load for those who did not seek out financial help for their degrees.

While young, college educated households without student loan debt claim an average overall debt load of $73,250, households with student debt have $137,010 to pay back, thanks to additional reliance on mortgage, vehicle and credit card debt, often spurred by the need to finance purchases due to smaller amounts of disposable income in the years following graduation as they work toward paying back college bills.